Factors Leading to Significant Potential Company Value

  1. IP (Intellectual, Human/Experiential, and Financial

a) Intellectual Property (IP): If a company can solve a problem that involves superior intellectual abilities (eg. AlphaZero can win a chess match), then it has significant potential value. IP also refers to legal protection. By holding patents, you have the option to protect a potential intellectual advantage in a market.

b) Human/Experiential Capital: If there’s a winning team capable of solving significant challenges, that increases the potential value of the company.

c) Financial Capital: If a company has significant resources, it can afford to build a significant presence or network capable of generating a significant advantage.

2. Product-Market Fit

My definition of product/market fit is the degree to which you can design a product/service that solves a problem so well that you have the ability to attract the following:

  • Significant revenue
  • Ability to increase pricing

3. Investing in Vertical Integration to Capture Significant Revenue in a Large Market

By investing in vertical integration and widespread cover, multiple products/services have become almost essential oligopolies to users including the following:

  • mobile carriers (eg. TMobile, AT&T, Verizon)
  • credit card issuers (eg. Visa, Mastercard, and AMEX)
  • Amazon (enabling one hour delivery by having significant vertical integration in some markets)
  • Overnight delivery service providers (eg. DHL, Fedex and UPS)

4. Network Effects/Widespread Adoption/Exclusive Content

  • Search (eg. Google)
  • Connections/Relationships (eg. Facebook and LinkedIn)-
  • Unique content (eg. Facebook/Instagram, Netflix, YouTube, and Twitch)

5. Good Strategy/Management/Governance 

Structuring with some of the following characteristics may increase the odds of success:

  • Creating a board of directors
  • Aligning incentives
  • Having a defined a process for decision-making and dispute resolution
  • Applying a meritocratic system of sharing ideas where the best ideas win
  • Reporting data systematically/regularly to key stakeholders to make decisions

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